PG plc - Full-Year Results

On 27 August 2020, PG plc published the Annual Report and Financial Statements for the financial year ended 30 April 2020.

Performance Overview

During the 2019/20 financial year, PG reported an 11.1% increase in revenues to just under €120 million. The growth emanated from both the ‘Supermarkets & Associated Retail Operations’ which reported an 8.1% increase in revenues to €100.4 million (FY2018/19: €92.9 million), as well as the ‘Franchise Operations’ which posted a near 30% upsurge in sales to €19.6 million (FY2018/19: €15.1 million).

The higher level of business activity led a 10% increase in operating costs (net of recharges of expenses to retail operators) to €104.9 million (FY2018/19: €95.4 million). Nonetheless, given the stronger increase in revenues, operating profit increased by almost 20% to €15.1 million (FY2018/19: €12.6 million). Operating profit generated from the ‘Supermarkets & Associated Retail Operations’ increased by 9.7% to €12.1 million (FY2018/19: €11.1 million) whilst the contribution from the ‘Franchise Operations’ almost doubled to €2.98 million compared to €1.54 million in the previous financial year reflecting the impact of the temporary closure (during the 2018/19 financial year) of the company’s flagship Zara® store located in Sliema due to a sizeable extension and complete refurbishment which took place between July and November 2018. Accordingly, the 2019/20 financial results include, for the first time, a near full twelve-month contribution from the new Zara® Sliema outlet as the store had to close again from 23 March 2020 to 3 May 2020 due to the restrictions imposed by health authorities following the outbreak of ‘COVID-19’ in Malta. Meanwhile, the operating profit margin of the ‘Supermarkets & Associated Retail Operations’ improved to 12.1% (FY2019/20: 11.9%) whilst that of the ‘Franchise Operations’ rose to 15.2% compared to 10.2% in the FY2018/19 financial year and 18.2% in the previous twelve-month period in FY2017/18.

Net finance costs increased markedly to €1.59 million compared to €0.63 million in 2018/19. However, the increase is solely due to the implementation of the new accounting rule ‘IFRS 16 – Leases’. In fact, excluding the impact of ‘IFRS 16 – Leases’, net finance costs would have amounted to €0.59 million reflecting a drop of 7.3% on the back of the further reduction in the amount of bank borrowings to €17.6 million compared to €24 million as at the end of April 2019.

Overall, PG reported a pre-tax profit of €13.4 million, representing an increase of 12.1% over the €12 million figure in the previous twelve months. The tax charge for the year amounted to €3.78 million, leading to a net profit of €9.65 million which is 8% higher than the previous comparable figure of €8.94 million. The net profit generated by PG for the 2019/20 financial year translates into a return on average equity of 23.6% which is around 100 basis points lower than the return recorded in the previous year due to the further build-up in the company’s equity base.

The Statement of Financial Position as at 30 April 2020 when compared to the corresponding figures as at 30 April 2019 shows that total assets increased by 19.6% to €102.8 million mostly due to the recognition of €16.5 million in ‘Right-of-Use Assets’ in line with the implementation of accounting rule ‘IFRS 16- Leases’. Similarly, total liabilities increased by over 25% to €59.5 million as the €6.41 million reduction in bank borrowings was offset by the recognition of €16.9 million in ‘Lease Liabilities’. For this reason, the net debt to EBITDA multiple deteriorated marginally to 1.78 times compared to 1.57 times in FY2018/19. PG’s equity base expanded by a further 12.6% to €43.3 million (30 April 2020: €38.5 million) but the gearing ratio (calculated as total debt divided by total debt and equity) increased to 44.3% from 38.4% as at 30 April 2019.

From a cash flow perspective, PG generated €15.5 million in net cash from operations during the 2019/20 financial year, €3.25 million of which were used towards investing activities and another €12 million were used towards financing activities including €7.17 million in the repayment of borrowings and leases, as well as €4.8 million towards the payments of dividends. Indeed, PG paid out total net dividends of €0.0444 per share (+6.7%) for the 2019/20 financial year. This represents a payout ratio of 49.7% which is in line with the indicated dividend policy at the time of the equity IPO.

Outlook

In their commentary, the Directors of PG explained that the company performed particularly well in the first ten months of the financial year, bolstered by the successful operation of the Zara® Sliema outlet, a steady performance at PAMA and sustained growth at PAVI which benefited from a substantial refurbishment programme that is now in its final stages. In the final two months of the financial year, however, PG’s operations were materially impacted by the outbreak of ‘COVID-19’, which had a negative impact on the ‘Franchise Operations’ in particular and the rental income from retail and catering outlets. On the other hand, ‘COVID-19’ did not have a material impact on the food supermarket activities that constitute the core of PG’s operations.

The company further explained that it continued to operate profitably even during the ‘COVID-19’ lockdown period when economic activity in a number of sectors was severely curtailed. Furthermore, on the basis of the experience recorded to date, and on the basis of PG’s detailed projections for the coming twelve months and beyond, factoring in the disruptions created by the ‘COVID-19’ pandemic, the company expressed its confidence about its prudent approach to business which should not inhibit its ability to capitalise on suitable opportunities that may be identified from time to time. The target for the current financial year is that of attaining a net result that is comparable to that reported for the financial year ended 30 April 2020. PG reported that during the first quarter that ended on 31 July, the results are ahead of target.

Download

PG plc – 2019/20 Annual Report and Consolidated Financial Statements.